Since I left Kiplinger's more than two years ago to become an investment adviser, one thing that has changed is the nature of my junk e-mail. In addition to touts from penny-stock promoters, I now get a boatload of pitches for services designed to help me sign up "the ultra-high-net-worth investor."

Investment advisers and brokers have a huge incentive to enroll wealthy clients. Many advisers earn their keep on the basis of their clients' assets. The more assets we have under management, the bigger the fees we collect. And in this business, having more inventory doesn't mean you need a larger warehouse.

Although richer clients pay more, that doesn't mean they have access to better investments. Indeed, many of the products that the industry pitches to the wealthy are just as bad as the high-fee variable annuities peddled to seniors with relatively modest bank accounts.

Consider hedge funds and separately managed accounts -- two products that have surged in popularity in recent years. A key selling point of hedge funds is pure snob appeal: You typically need a net worth of at least $1 million to invest in one. Hedge funds can make for terrific cocktail chatter.

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You'd imagine that any group that well heeled would demand the very best. Don't bet on it. Indeed, my thinking is that you'd better have at least $1 million to invest in a hedge fund because you need to be prepared to lose a lot of money.

Hedge funds differ from mutual funds in a variety of ways. Hedge funds are much less regulated. You often can't get your money out of a hedge fund when you want to -- no matter how badly the fund is doing.

And a hedge fund can do all kinds of risky things that a mutual fund can't. It can invest most or all of its assets in private, rather than publicly traded, investments. It can borrow as much as it wants to multiply its bets -- dramatically increasing your risk.

Finally, hedge-fund fees are breathtaking. The typical management fee is 2% annually. On top of that, the manager usually takes a 20% cut of the fund's yearly profits -- and, of course, shares in none of the losses. One wag once described hedge funds as "a compensation scheme masquerading as an asset class."

To be sure, some brilliant hedge-fund managers have delivered fabulous results. But the odds of getting into one of their funds without being extremely well connected on Wall Street are slim. What you're likely to be sold instead is a hedge fund run by a one-time mutual fund manager who decided to reach for the gold ring.

My strong advice: Stay away.

Separately managed accounts are a different animal. In an SMA, you actually own individual securities (stocks and bonds) rather than shares of a mutual fund -- which are, after all, for the riffraff.

But guess what? The people who run your SMA often work for a mutual fund company. In fact, there's a good chance they run a mutual fund that is similar, if not nearly identical, to your SMA.

Theoretically, a separately managed account gives you a couple of advantages over a mutual fund. You can exclude stocks you object to on social grounds -- for instance, if you detest tobacco stocks, you can drop them from your holdings. And you can control the timing of sales of individual securities to help your tax situation.

But few investors employ these options. Why? My hunch is that the brokerage firms that employ SMAs discourage investors by arguing that any tinkering on their part could hurt their returns.

SMAs are sticky. That is, once you're in one, it's cumbersome to get out. To leave, you may have to sell hundreds of stocks instead of a small number of mutual funds.

(Some brokerages and advisers use a similar tactic to help hold on to asset-rich mutual fund investors. Instead of buying, say, a dozen mutual funds, a number that in almost every instance will provide adequate diversification, they'll buy 70 or 80 or more funds for a client. Again, you have to sell a lot of securities to exit.)

SMAs are now sold even to relatively small investors. If you bargain hard on fees, you may be able to get an SMA account for no more than you'd pay for a mutual fund. But there are a lot more good funds than there are good SMAs -- and it's much harder to find data on SMAs than it is to find data about funds.

Looking for the thrill of a hedge fund but like the idea of strong regulation and relatively low fees? CGM Focus (symbol CGMFX) is as aggressive as they come in the mutual fund arena. Manager Ken Heebner typically holds fewer than 25 stocks, trades them frenetically and invests in companies located anywhere in the world. And he also sells stocks short in the hope of profiting from lower share prices.

Over the past ten years through July 28, the fund, a member of the Kiplinger 25, returned an annualized 24.6%. That compares with a 2.6% annualized return for Standard & Poor's 500-stock index. Year-to-date through July 28, the fund lost 4.7%, beating the S&P 500 by ten percentage points. Expenses are 1.27% annually. (See The Insightful Ken Heebner for more.)

How about a low-risk fund that times the market, dabbles in commodities and also sells some stocks short? Leuthold Asset Allocation (LAALX) could be your ticket. The fund is two years old, but older brother Leuthold Core Investment (LCORX) gained an annualized 11.3% over the past ten years -- with 30% less volatility than the S&P 500. Asset Allocation lost 5.5% year-to-date, improving on the S&P 500 by 9.2 percentage points. Its annual expense ratio is 1.43% (See Shelter From the Storm.)

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